The Good: Maybe we should make canola the permanent good news story of the day. Yes there are some other commodities that have shone from time to time, but canola has been a regular star from the beginning of August to present. This rally has been quite impressive as it has happened without the support of the soybean or soybean oil markets. As impressive as the rally has been, the valuations when compared with soybean futures for the May contract are being stretched. May canola futures now enjoy a premium of C$85.49 per tonne over soybeans. The canola market has gone from an average premium to the current levels in three short days.
The Bad: The weather in Western Canada over the past two weeks has slowed grain movement to the west coast. The railways run shorter trains when temperatures dip below -25C, which reduces overall capacity. The exports during week 28 were down 262,000 tonnes from the previous week, but rail performance has only been part of the story. There was a cold outbreak on the West Coast on the weekend with snow falling on Vancouver Island and the lower mainland. With temperatures improving on the Prairies, the concern will likely shift from rail movement to the vessel loading conditions in Vancouver and Prince Rupert. Rains are expected through the next seven days in both Vancouver and Prince Rupert. The current forecast for Vancouver is shown below. Not a lot of sunshine forecast during the next seven days!
The Ugly: The Southern Plains cold snap seems to be a distant memory in the wheat markets as today’s rally was seen to be driven by a lower production estimate in Russia. Looking at the high temperatures today across the Prairies, Edmonton appears to be setting a daily high temperature around the -2C mark. When you compare that with the current temperatures in western Kansas one quickly realizes that the temperatures have not recovered back to even close to normal levels. The current high in Garden City, Kansas is -4C and maximum temperatures have not been above freezing since February 7th. The average high for Garden City is close to 10C at this time of year. Garden City is expected to move above the freezing mark tomorrow with a forecast high to 2C. Edmonton by the way is expected to crack above the 1C mark tomorrow as well.